The IMF Country Reports Series covers economic and financial developments and trends in member countries. Each report, prepared by a staff team after discussions with officials of the country, is published at the option of the member.
This Selected Issues paper discusses fiscal sustainability and capital expenditures for Equatorial Guinea. The paper formulates a permanent income hypothesis model and estimates it using data on oil revenues from Equatorial Guinea. The first methodology is based on a standard permanent income model, using a 50-year time horizon and real rate of return of 2 percent. The paper then extends the model to incorporate a feedback effect from capital spending to non-oil GDP growth, and shows its implications for fiscal sustainability.